Advantages and Disadvantages of GST

5paisa Research Team Date: 27 Apr, 2023 03:45 PM IST


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The Goods and Services Tax (GST) is one of India's most revolutionary tax reforms. Designed to subsume several indirect taxes collected by the Centre and State, GST ensures nationwide tax uniformity. Implementation of GST eliminated tax liabilities such as VAT, service tax, and excise, freeing Indians from the burden of double taxation. 

While some supported the reform, others opposed it. Interestingly, years have passed since the implementation of GST, and most people are still unaware of the core concept of GST. Like any other reform, GST has its fair share of benefits and loopholes.

This article provides a detailed analysis of the meaning with the main advantages and disadvantages of GST in India. 

What is GST?

The Annual Budget speech on February 28, 2006, mentioned the Goods and Services Tax for the first time in India. Its primary motive was to simplify the indirect taxation system by implementing a robust unified solution. Later, in July 2017, the Indian Parliament gave its final nod to the authorities to proceed with GST implementation across the country. 

GST has a dual structure, as per which the Centre and States have been bestowed with the power to levy the tax on the supply of goods and services. The Center can levy and administer Central GST and Integrated GST, whereas the states or the Union Territories have the authority to levy State-GST or Union Territory GST, respectively.

GST is a single, all-inclusive tax applicable to all services and goods. The current GST slabs for Indian taxpayers are 0%, 5%, 12%, 18%, and 28%, each featuring a different category of goods and services. Occasionally-used GST rates like 3% and 0.25%. Apart from these, the GST rates for composition taxable citizens are 1.5%, 5%, or 6% against their turnover. 

What are the Merits and Demerits of GST?

The Goods and Services Tax was a sincere attempt of the government to bring uniformity to the Indian tax system. Earlier, you had to pay tax at every level involved in the delivery of services and goods. GST removed this multiple tax system on a single product and introduced a single tax regime. It brought about a significant surge in the volume of online transactions in India. Moreover, GST implementation gave a push to business entities in the pursuit of an organised tax framework. 

Amid a pool of merits, GST also has the burden of many disadvantages to its credit. The organised tax regime compelled taxpayers to move towards a more regulated structure that forbade irregularities. Additionally, with a shift to an online system, GST pushed people to change their work strategies overnight. All these advantages and disadvantages of GST will cover in the next section of this article. 

The advantages and disadvantages of GST are discussed below

An analysis of GST advantages and disadvantages will help you understand this tax reform and the core ideology that brought a massive revolution in the Indian tax system. 

Advantages of GST

1.    One tax system

Eliminating the bundle of taxes from the Indian tax cluster was one of the main reasons for the launch of GST. Earlier, Indians were forced to carry the burden of multiple indirect taxes such as VAT, service tax, etc. GST put forward a well-designed, systematic tax framework that was easy to follow and ensured better results. The uniformity that came with GST helped authorities bring more people under the umbrella of tax laws.  

2.    Integrated market 

The Goods and Services Tax nurtures a comprehensive system that strives to eliminate economic restrictions. Thus, eventually paving the way for an integrated market that works for all. Moreover, GST supports equity among states. The tax amount collected on goods and services is distributed across all the participating states without prejudice. 

3.    No cascading effect

Cascading tax implies a situation where involved parties must pay taxes on products at each successive level in the supply chain. Each purchaser pays the price based on the cost of the product, including the previous tax charged on it. GST settles for easy tax credits across the supply chain, thus ensuring minimum tax cascading. 

4.    Less regulatory guidelines

Before GST, taxpayers paid different indirect taxes. They followed different compliance rules for each tax liability paid by them. GST replaces multiple taxes with a single regime, thus reducing the burden of regulatory compliance. There are eleven returns under GST pursuit. Out of these, four involve basic taxes that apply to all eligible taxpayers, irrespective of their work. 

5.    Online Transactions

GST ensures digital tax management through its official online portal. Taxpayers can visit the website to register, pay taxes, and fetch returns easily. Moreover, with more online dependence, the government has achieved greater participation from people regarding tax filing.  

Disadvantages of GST

1.    Increased expenses

GST requires companies to switch to advanced solutions like ERP or GST-specific software for smooth functioning. However, purchasing, installing, and using these advanced solutions can be quite expensive. Furthermore, the administrative costs involved in training your employees to acquaint them with these solutions can be quite high. 

The overall costs of business entities have increased because they now have to invest in hiring professionals to manage their GST requirements.

2.    Higher tax liability on SMEs

One of the main disadvantages of GST is that it has caused a surge in the tax burden for MSMEs. Earlier, firms with an annual turnover of over INR 1.5 crore were subject to excise duty. However, under the new tax regime, any company whose annual sales cross INR 20 lakh must pay the tax liability. 

GST has a composition scheme for SMEs with a revenue of less than INR 1 crore. These entities are required to pay 1% of their yearly revenue as tax. Likewise, the firms choosing this composition scheme cannot claim the input tax credit. 

3.    Online Working

GST advocates online tax management. Since the inception of the new tax regime, all the processes involved in the system have witnessed become digital. This includes registration, tax filing, and tax payment. 

While switching to the online system is easier for big companies, it can be a hassle for small entities with limited resources to invest in. It can be difficult for small enterprises to learn about GST-compliance software and implement it into their core working setup. 


The taxation system of a country forms the strongest pillar of its economy. Thus, it is necessary to ensure a robust, simple, and citizen-friendly tax framework exists in a country. With GST, the Indian government experimented with setting up a strong tax cluster that works for the betterment of the nation and its people. This article elaborates on the advantages and disadvantages of GST straightforwardly so you can understand the concept well. The proper analysis of GST advantages and disadvantages will help you comply with its rules easily.  

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Frequently Asked Questions

State and central governments, both, can levy GST. The centre can impose CGST and IGST, while the states and UTs can levy SGST or UGST, respectively. 

If a person liable to file GST returns fails, they will have to pay a penalty of 10% of the tax due or Rs. 10,000, whichever is higher.

Under the GST regime, regular businesses with more than Rs. 5 crores as annual aggregate turnover must opt for monthly filing of returns compulsorily. Whereas taxpayers with a turnover of Rs. 5 crores can file quarterly or monthly returns.

As per the GST Act, every state or Union Territory business entity will have a unique Goods and Services Tax Identification Number, also known as GSTIN. It is a state-wise- PAN-based 15-digit number.

Nil returns can be filed for a particular period. Suppose a taxpayer has not made any outward supply (sale), received any inward supply (purchase) of any goods/ services, and has no tax liability. In that case, they can file a Nil return for that period.

EVC is an electronic verification code for the taxpayer to authorise the return filing. The steps to file a return with EVC are:

1.    Click on Proceed to file.
2.    The second step is to accept the declaration.
3.    Select the authorised signatory from the Authorized Signatory drop-down list.
4.    Click the FILE GSTR-3B WITH EVC button or another type of return option to file a GST return with EVC.
5.    Lastly, enter the OTP sent by e-mail and mobile number of the Authorised Signatory registered at the GST Portal and click verify button.
6.    The return gets successfully filed once the OTP is verified.

The due date for filing GSTR-3B is the 20th of the month. However, under the QRMP Scheme, the taxpayer must make monthly payments based on the estimated tax by the 25th of the month and file a GST Return every quarter through the GSTR-3B form.

The cost of opening a GST account is nil. It means that the taxpayer is not required to pay any fees or charges for GST registration to the Government.